The Pinnacle Funds - scotiabank.com · The Pinnacle Funds Simplified Prospectus December 11, 2009...

The Pinnacle FundsSimplified ProspectusDecember 11, 2009

No securities regulatory authority has expressed an opinion aboutthese units. It is an offence to claim otherwise.

The Funds and the units they offer under this simplified prospectusare not registered with the U.S. Securities and ExchangeCommission. Units of the Funds may be offered and sold in theUnited States only in reliance on exemptions from registration.

Class A and Class F units and Class I units where noted

Money Market Fund

Pinnacle Short Term Income Fund

Bond Funds

Pinnacle Income Fund

Pinnacle High Yield Income Fund

Pinnacle American Core-Plus Bond Fund (Class I units available)

Real Estate Fund

Pinnacle Global Real Estate Securities Fund (Class I units available)

Balanced Fund

Pinnacle Strategic Balanced Fund

Canadian Equity Funds

Pinnacle Canadian Value Equity Fund

Pinnacle Canadian Mid Cap Equity Fund

Pinnacle Canadian Growth Equity Fund

Pinnacle Canadian Small Cap Equity Fund (Class I units available)

Foreign Equity Funds

Pinnacle American Value Equity Fund (Class I units available)

Pinnacle American Mid Cap Value Equity Fund (Class I units available)

Pinnacle American Large Cap Growth Equity Fund

Pinnacle American Mid Cap Growth Equity Fund (Class I units available)

Pinnacle International Equity Fund (Class I units available)

Pinnacle International Small to Mid Cap Value Equity Fund

(Class I units available)

Pinnacle Global Equity Fund (Class I units available)

Table of Contents

INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

SPECIFIC INFORMATION ABOUT EACH OF THE MUTUAL FUNDS DESCRIBED IN THISDOCUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

ABOUT THE FUND DESCRIPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Pinnacle Short Term Income Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Pinnacle Income Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Pinnacle High Yield Income Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Pinnacle American Core-Plus Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Pinnacle Global Real Estate Securities Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Pinnacle Strategic Balanced Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Pinnacle Canadian Value Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Pinnacle Canadian Mid Cap Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Pinnacle Canadian Growth Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Pinnacle Canadian Small Cap Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

Pinnacle American Value Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

Pinnacle American Mid Cap Value Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Pinnacle American Large Cap Growth Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Pinnacle American Mid Cap Growth Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

Pinnacle International Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

Pinnacle International Small to Mid Cap Value Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

Pinnacle Global Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

WHAT IS A MUTUAL FUND AND WHAT ARE THE RISKS OF INVESTING IN A MUTUALFUND?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

ORGANIZATION AND MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

PURCHASES, SWITCHES AND REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

About the Classes of Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

How to Buy the Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

How We Calculate Net Asset Value Per Unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

How to Place Orders for the Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

How to Switch the Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

How to Switch between Classes of a Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

How to Redeem Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

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OPTIONAL SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

Tax-Deferred Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

Optimized Portfolios (Class A Units). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

Custom Portfolios (Class A Units). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

Automatic Rebalancing (Class A Units). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

Pre-Authorized Chequing Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

Automatic Withdrawal Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57

DEALER COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59

DEALER COMPENSATION FROM MANAGEMENT FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

INCOME TAX CONSIDERATIONS FOR INVESTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

How your Investment Can Earn Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

How Earnings are Taxed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Units Held Outside a Tax-Deferred Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Units Held in a Tax-Deferred Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

WHAT ARE YOUR LEGAL RIGHTS?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

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IntroductionIn this document, the Manager, we, us, and our refer to Scotia Asset Management L.P. and

ScotiaMcLeod refers to ScotiaMcLeod, a division of Scotia Capital Inc.

This simplified prospectus contains selected important information to help you make an informeddecision about the Pinnacle Funds (the “Funds”), and to understand your rights as an investor.

It is divided into two parts. The first part, from pages 4 to 46, contains specific information abouteach of the Funds described in this document. The second part, from pages 47 to 61 explains what mutualfunds are and the different risks you could face by investing in mutual funds, and also contains generalinformation that applies to all of the Funds described in this document.

Additional information about the Funds is available in the Funds’ annual information form, theirmost recently filed annual and interim financial statements and their most recently filed annual and interimmanagement reports of fund performance. These documents are incorporated by reference into thissimplified prospectus. This means they legally form part of this simplified prospectus just as if they wereprinted in it.

You can get a copy of the Funds’ annual information form, financial statements and managementreports of fund performance at no cost by asking your dealer, or by calling toll free at 1-800-268-9269(416-750-3863 in Toronto), or by email through our website at www.scotiabank.com/pinnaclefunds.

These documents and other information about the Funds are also available at www.sedar.com, or onour website at www.scotiabank.com/pinnaclefunds.

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Specific Information About Each of the MutualFunds Described in This Document

The Funds are a family of 17 mutual funds. All of the Funds offered for sale under this simplifiedprospectus offer Class A and Class F units. Some of the Funds also offer Class I units.

The classes have different fees and are intended for different investors. Class A units are only availableto investors who participate in the Pinnacle Program through ScotiaMcLeod advisors or as otherwisepermitted by the Manager. Class F units are generally available only to investors who have fee-basedaccounts with their dealer. We may make Class F units available to other investors from time to time.Class I units are available only to eligible institutional investors and other qualified investors and arecurrently only available through Scotia Asset Management L.P.

About the Fund DescriptionsOn the following pages, you will find detailed descriptions of each of the Funds to help you make

your investment decisions. Here is what each section of the Fund descriptions tells you.

Fund Details

This section gives you some basic information about each Fund, including what kind of Fund it is,when it was established and its eligibility for registered plans. See the individual Fund descriptions startingon page 7 for details.

What Does the Fund Invest In?

This section includes the Fund’s fundamental investment objectives and the strategies it uses in tryingto achieve those objectives. Any change to the fundamental investment objectives must be approved by amajority of votes cast at a meeting of unitholders held for that reason.

Portfolio Advisor Selection and Monitoring

The Manager has retained the services of an independent investment consulting firm, NT GlobalAdvisors, Inc. (“NTGA”), a wholly owned subsidiary of Northern Trust Corporation, to assist in theselection and monitoring of portfolio advisors (the “Portfolio Advisors”). Based on consultation with andresearch on prospective portfolio advisors, NTGA evaluates and recommends a group of qualified portfolioadvisors who, in the opinion of NTGA, are best able to carry out the investment objectives and strategiesof the Funds. Portfolio Advisors are then chosen by the Manager from this group based on each PortfolioAdvisor’s specialized expertise, performance, consistency, investment philosophy or style, investmentdisciplines and quality of service. Each Portfolio Advisor is required to operate within the limits of theinvestment objectives, restrictions and any supplemental guidelines developed from time to time by theManager.

On an ongoing basis, NTGA will monitor the performance of the Portfolio Advisors and report to us.

About Derivatives

What is a derivative? It is a contract between two parties whose value is based on, or derived from, anunderlying asset, such as a stock, a market index such as the S&P/TSX Composite Index or thesecurities of another mutual fund. It is not a direct investment in the underlying asset itself. Examplesof derivatives are options and forward contracts.

• Options generally give holders the right, but not the obligation, to buy or sell an asset such as asecurity or currency at a set price and at a set time. Option holders normally pay the other party acash payment, called a premium, for agreeing to give them the option.

• Forward contracts are agreements to buy or sell an asset, such as a security or currency, at a setprice and at a set time. The parties have to complete the deal, or sometimes make or receive acash payment, even if the price has changed by the time the deal closes.

4

Generally, derivative investments can be designed to create an obligation on either contractual party todeliver cash or securities on the occurrence of a specific future event. Canadian securities laws prohibita Fund from investing in derivatives unless the Fund retains sufficient cash or cash equivalents tocover the exposure created by the derivative investment. As a result, it is not possible for the Funds toleverage their investment in derivatives. All the Funds that invest in derivatives maintain sufficient cashor highly liquid cash equivalents such as treasury bills or bankers acceptances to cover their obligationsunder the derivative instruments. By limiting a Fund’s exposure to derivatives, the risk associated withusing derivative investments is greatly reduced. Therefore, except as described below, the market riskassociated with investing in derivatives to obtain exposure to a security, market, or currency isgenerally the same as a direct investment by the Fund in that security, market or currency.

There may be a number of reasons why a Fund may use derivatives. Derivatives can:

• be structured to protect an investor if a particular asset denominated in a foreign currency declinesin value (called “hedging”)

• reduce transaction costs

• provide more effective exposure to foreign markets than direct investments.

About Securities Lending

Some of the Funds may enter into securities lending transactions to generate additional income fromsecurities held in a Fund’s portfolio. A mutual fund may lend securities held in its portfolio toqualified borrowers who provide adequate collateral. For a description of the strategies the Funds useto minimize the risks associated with these transactions, see ‘Securities Lending Risk’ under ‘What arethe risks of investing in a mutual fund?’.

About Repurchase and Reverse Repurchase Transactions

Some of the Funds may enter into repurchase or reverse repurchase agreements to generate additionalincome from securities held in a Fund’s portfolio. When a mutual fund simultaneously agrees to sell asecurity at one price and buy it back on a specified date at a lower price, it is entering into arepurchase transaction. When a mutual fund simultaneously agrees to buy a security at one price andsell it back on a specified later date at a higher price, it is entering into a reverse repurchasetransaction. For a description of the strategies the Funds use to minimize the risks associated withthese transactions, see ‘Repurchase and Reverse Repurchase Transaction Risk’ under ‘What are the risksof investing in a mutual fund?.

About REITs

A Real Estate Investment Trust (“REIT”) is an entity that buys, manages and sells real estate assets.REITs allow participants to invest in a professionally managed portfolio of real estate properties.REITs qualify as pass-through entities, which are able to distribute the majority of income cash flowsto investors without taxation at the corporate level (providing that certain conditions are met). As apass-through entity, whose main function is to pass profits on to investors, a REIT’s business activitiesare generally restricted to generation of property rental income. Another major advantage of a REIT isits liquidity (ease of liquidation of assets into cash), as compared to traditional private real estateownership which can be difficult to liquidate. One reason for the liquid nature of a REIT is that itsunits are primarily traded on major exchanges, making it easier to buy and sell REIT assets/units thanto buy and sell properties in private markets. See also ‘Real Estate Sector Risk’ and ‘InvestmentTrust Risk’ under ‘What are the risks of investing in a mutual fund?.

About Purchasing Debt from Related Parties

The Funds may purchase or sell non-government and government debt securities in the secondarymarket from, or to, Scotia Capital Inc. or one of our affiliates. The Funds may only do so in relianceupon an exemption from the Canadian Securities Administrators and provided that such transactionsare done in accordance with certain conditions.

What are the Risks of Investing in the Fund?

This section shows the specific risks associated with each Fund. For an explanation of these risks, see‘What are the risks of investing in a mutual fund?’.

5

Who Should Invest in this Fund?

This section tells you the type of portfolio or investor the Fund may be suitable for. This is meant asa general guide only. For advice about your portfolio, you should consult your dealer or advisor.

Distribution Policy

This section tells you when the Fund usually distributes any income and capital gains to unitholders.The Funds may also make distributions at other times. Each class of units will share distributions. See‘Income Tax Considerations for Investors’ for more information about how distributions are taxed.

Fund Expenses Indirectly Borne by Investors

A Fund pays its expenses out of its assets. This means investors in a Fund indirectly pay for theseexpenses through lower returns. This chart allows you to compare the costs of investing in a Fund with thecost of other mutual funds. This chart is for illustrative purposes as required by securities regulators and itshows the cumulative expenses you would have paid over various time periods if you:

• invested $1,000 in the Fund; and

• earned a total annual return of 5%, which may be different than the Fund’s actual return in anygiven year.

If a Fund does not offer Class I units or did not previously offer Class F or Class I units, no fundexpenses information is available for that Class. You will find more information about fees and expenses in‘Fees and Expenses’.

The management expense ratio (“MER”) is based on total expenses for each year shown. It’s expressedas a percentage of daily average net assets during the period. The MER is shown as an annualized rate evenif a Fund’s financial year is less than 12 months. The MER includes all the expenses borne directly by aFund, including interest charges and taxes of most types.

The information in this chart assumes that the Fund had the same MER each year as it did in theFund’s last completed financial year. See ‘Fees and Expenses’ for more information about the costs ofinvesting in the Funds.

6

MONEY MARKET FUND


This Fund has the lowest risk of all the PinnacleFunds because it invests in very high qualityshort term instruments. This Fund ismanaged to attempt to maintain a constantunit value of $10. Interest income will varywith short term interest rates.

7

Pinnacle Short Term Income FundFund Details

Type of Fund Canadian money market fund

Date Established October 6, 1997

Type of Securities Class A: since October 6, 1997

Class F: since December 22, 2008

Eligible for Registered Plans? Yes

Portfolio Advisor Scotia Asset Management L.P.

Toronto, Ontario

What does the Fund invest in?

Investment Objectives

The Fund’s investment objective is to preserve investment capital while providing interest income andmaintaining liquidity by investing primarily in highly liquid, senior investment grade money marketinstruments (i.e. federal and provincial treasury bills and bonds) and bankers acceptances with a minimumcredit rating of R-1 (low) or A-1 (low).

Any change to the fundamental investment objectives of the Fund must be approved by a majority ofvotes cast at a meeting of unitholders called for that purpose.

Investment Strategies

The Fund’s investments will have a maximum 90 days average term to maturity. The Fund’sinvestments may also include:

• up to 30% foreign government money market instruments

• other money market investments.

The Fund aims to maintain a constant unit value of $10 by crediting income and capital gains dailyand distributing them monthly.

The Fund may participate in securities lending, repurchase and reverse repurchase transactions toachieve its investment objectives and to enhance returns. You’ll find more information about securitieslending, repurchase and reverse repurchase transactions and how the Fund limits the risks associated withthem under ‘What are the risks of investing in a mutual fund?.’

What are the risks of investing in the Fund?

Returns may vary with movements in interest rates.

Although the Fund intends to maintain a constant unit price of $10, there is no guarantee that theprice will not go up or down.

See ‘What are the risks of investing in a mutual fund? — General Investment Risk, Class Risk, InterestRate Risk, Credit Risk, Foreign Exchange Risk, Foreign Securities Risk, Securities Lending Risk,Repurchase and Reverse Repurchase Transaction Risk’.

Who should invest in this Fund?

This Fund may be suitable for you if:

• you want interest income and liquidity with a high level of safety

• you’re investing for the short term

• you’re looking for low risk and safety of principal.

8

Distribution Policy

The Fund allocates net income daily and distributes it monthly on the last business day of eachmonth. Distributions on units are reinvested in additional units of the Funds unless you tell us in writingthat you want to receive cash distributions.

Fund expenses indirectly borne by investors

This example shows the Fund’s expenses on a $1,000 investment with a 5% annual return.1

Fees and expenses payable over: 1 year 3 years 5 years 10 years

Class A $5.33 $16.80 $29.45 $67.04

1 As Class F units have been offered for less than one year, expense information for the first full year is notyet available.

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P I N N A C L E S H O R T T E R M I N C O M E F U N D

BOND FUNDS

Pinnacle Income FundPinnacle High Yield Income FundPinnacle American Core-Plus Bond Fund

The Bond Funds aim to offer the potentialfor higher interest income than the MoneyMarket Fund. These Funds are more sensitiveto changes in interest rates and the credit-worthiness of issuers.

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Pinnacle Income FundFund Details

Type of Fund Global fixed income fund





Portfolio Advisor Fiera Capital Inc.

Toronto, Ontario



The Fund’s investment objective is to preserve investment capital while seeking to achieve increasedincome by investing primarily in a portfolio of Canadian government and corporate bonds, preferred sharesof Canadian corporations and loans of supranational organizations.



The Fund’s investments may also include:

• mortgage backed securities, mortgage bonds and mortgages

• term loans

• short term instruments and cash equivalents

• up to 30% foreign investments.

Duration may vary by no more than one year from the duration of the DEX Universe Bond Index.The Portfolio Advisor may actively trade the Fund’s investments. This can increase trading costs, whichmay lower the Fund’s returns. It also increases the chance that you will receive taxable distributions if youhold the Fund in a non-registered account.

The Fund may use derivatives for foreign currency hedging purposes only.

The Fund may participate in securities lending, repurchase and reverse repurchase transactions toachieve its investment objectives and to enhance returns. You’ll find more information about securitieslending, repurchase and reverse repurchase transactions and how the Fund limits the risks associated withthem under ‘What are the risks of investing in a mutual fund?’.


Returns will vary inversely with movements in interest rates (i.e. if interest rates rise, returns willdecline; if interest rates drop, returns will increase).

Longer term maturities may result in greater price fluctuations than would be expected of the PinnacleShort Term Income Fund.

See ‘What are the risks of investing in a mutual fund? — General Investment Risk, Class Risk, AssetBacked and Mortgage Backed Securities Risk, Interest Rate Risk, Credit Risk, Foreign Exchange Risk,Foreign Securities Risk, Securities Lending Risk and Repurchase and Reverse Repurchase Transaction Risk’.

11



• you want a high level of regular interest income while tracking the performance of a majorCanadian bond index

• you’re investing for at least three years

• you’re looking for lower risk.

Distribution Policy

The Fund will distribute sufficient net income and net taxable capital gains in the year they are earnedto ensure that the Fund does not have to pay ordinary income tax. Distributions on units are reinvested inadditional units of the Fund unless you tell us in writing that you want to receive cash distributions.

Income DistributionsCapital Gains Distributions

Quarterly in the last calendar month of each quarterAnnually in December of each year




Class A $0.82 $2.59 $4.53 $10.31


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P I N N A C L E I N C O M E F U N D

Pinnacle High Yield Income FundFund Details

Type of Fund High yield fixed income fund





Portfolio Advisor Guardian Capital LP

Toronto, Ontario



The Fund’s investment objective is to achieve superior long term returns and to provide income aswell as capital growth by investing primarily in high yield, lower rated Canadian corporate bonds, preferredshares and short term money market securities.



The Fund’s investments will have an average duration of 7 years and an average credit rating of single B.

The Fund’s investments may also include up to 30% high yield, lower rated bonds of U.S.corporations.

The Portfolio Advisor may actively trade the Fund’s investments. This can increase trading costs,which may lower the Fund’s returns. It also increases the chance that you will receive taxable distributionsif you hold the Fund in a non-registered account.


The Fund may participate in securities lending, repurchase and reverse repurchase transactions toachieve its investment objectives and to enhance returns. You’ll find more information about securitieslending, repurchase and reverse repurchase transactions and how the Fund limits the risks associated withthem starting under ‘What are the risks of investing in a mutual fund?’.




Higher potential for gain and greater risk of loss associated with lower rated securities.

See ‘What are the risks of investing in a mutual fund? — General Investment Risk, Class Risk, InterestRate Risk, Credit Risk, Foreign Exchange Risk, Foreign Securities Risk, Securities Lending Risk andRepurchase and Reverse Repurchase Transaction Risk’.



• you’re seeking a high level of regular interest income

• you’re contributing to the income portion of a diversified portfolio

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• you can accept low to moderate risk.

Distribution Policy



Quarterly in the last calendar month of each quarterAnnually in December of each year




Class A $1.54 $4.85 $8.50 $19.34


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P I N N A C L E H I G H Y I E L D I N C O M E F U N D

Pinnacle American Core-Plus Bond FundFund Details

Type of Fund Global fixed income fund

Date Established February 14, 2002

Type of Securities Class A: since February 14, 2002


Class I: since December 22, 2008


Portfolio Advisor Logan Circle Partners, L.P.

Conshohocken, Pennsylvania



The Fund’s investment objective is to achieve superior long term returns and to provide income aswell as capital growth by investing primarily in a portfolio of U.S. government and corporate bonds andmortgage pass through securities. The Fund may also invest in the U.S. dollar denominated emergingmarkets, non-investment grade debt and non-U.S. investment grade sovereign and corporate debt.



The Fund’s investments in bonds will have an average credit rating of at least single A.

Up to 20% of the net asset value of the Fund may be invested in U.S. denominated non-investmentgrade (high yield and emerging market) bonds.

Up to 20% of the net asset value of the Fund may be invested in non-U.S. government agency andcorporate bonds.

At least 80% of the net asset value of the Fund will consist of investment grade securities. Investmentsin non-U.S. dollar denominated securities and non-investment grade securities will be made tactically basedon the Portfolio Advisor’s evaluation of spread management using fundamental bottom up research.


• short term instruments and cash equivalents

• U.S. denominated asset backed securities and mortgage backed securities.


The Fund may use derivatives for foreign currency hedging purposes.

The Fund may participate in securities lending, repurchase and reverse repurchase transactions toachieve its investment objectives and to enhance returns. You’ll find more information about securitieslending, repurchase and reverse repurchase transactions and how the Fund limits the risks associated withthem under ‘What are the risks of investing in a mutual fund?.



15


Higher potential for gain and greater risk of loss associated with lower rated securities.

See ‘What are the risks of investing in a mutual fund?’ — General Investment Risk, Class Risk, AssetBacked and Mortgage Backed Securities Risk, Interest Rate Risk, Credit Risk, Foreign Exchange Risk,Foreign Securities Risk, Securities Lending Risk, and Repurchase and Reverse Repurchase Transaction Risk’.



• you want a high level of regular interest income and U.S. dollar exposure


• you can accept low to moderate risk.

Distribution Policy



Quarterly in the last month of each quarterAnnually in December of each year




Class A $5.54 $17.45 $30.58 $69.62

1 As Class F and Class I units have been offered for less than one year, expense information for the first fullyear is not yet available.

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P I N N A C L E A M E R I C A N C O R E - P L U S B O N D F U N D

REAL ESTATE FUND

Pinnacle Global Real Estate Securities Fund

The Fund may have greater risk than regularEquity Funds since its exposure is to a singlesector. Also, as a class, Real Estate has oftendemonstrated a longer term cycle of marketgains and losses than other asset classes.

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Pinnacle Global Real Estate Securities FundFund Details

Type of Fund Real estate equity fund






Portfolio Advisor Forum Partners Europe (UK) LLP,

London, U.K.



The Fund’s objective is to achieve superior long term returns through income and capital growth, byinvesting primarily in U.S., Canadian and non-North American real estate stocks and real estate investmenttrusts (REITs).

Any change to the fundamental investment objectives of the Fund must be approved by the majorityof votes cast at a meeting of unitholders called for that purpose.


The Fund’s investments may consist of the following:

• up to 40% Canadian securities

• up to 100% REITs

• up to 100% foreign securities

• up to 15% cash and cash equivalents.


The Fund may participate in securities lending, repurchase and reverse repurchase transactions toachieve its investment objectives and to enhance returns. You’ll find more information about securitieslending, repurchase and reverse repurchase transactions and how the Fund limits the risks associated withthem under ‘What are the risks of investing in a mutual fund?.


Returns may vary with changes in interest rates and stock prices.

Returns may be affected by factors such as global economic and political conditions and the state offoreign markets.

Prices of equity securities tend to fluctuate more than those of fixed income securities, resulting ingreater price fluctuations than would be expected of the money market or bond Funds.

See ‘What are the risks of investing in a mutual fund? — General Investment Risk, Class Risk, InterestRate Risk, Foreign Exchange Risk, Foreign Securities Risk, Real Estate Sector Risk, Investment Trust Risk,Securities Lending Risk, and Repurchase and Reverse Repurchase Transaction Risk’.

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• you seek long term capital growth and income from real estate securities denominated in a varietyof currencies

• you seek diversification of your investment portfolio through an investment in real estate securities


• you can accept moderate risk.

Distribution Policy


Income Distributions Annually in December of each yearCapital Gains Distributions Annually in December of each year

As the Fund invests in REITs, and as cash distributions received by the Fund from the REITs areexpected to be substantially larger than the amount required to be included in the Fund’s income for taxpurposes, a portion of the Fund’s annual distributions to its unitholders is expected to represent returns ofcapital received by the Fund from such REITs. It is possible that all or a portion of such returns of capitalto unitholders may result in an encroachment upon a unitholder’s original capital investment in the Fund,depending on the nature of the Fund’s underlying investments and earnings from those investments.




Class A $2.77 $8.72 $15.29 $34.81


19

P I N N A C L E G L O B A L R E A L E S TAT E S E C U R I T I E S F U N D

BALANCED FUND


The Fund offers a combination ofequity, bonds and money market securitiesin a single investment. The Fundgenerally has less volatility than EquityFunds but more volatility than Income Funds.

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Pinnacle Strategic Balanced FundFund Details

Type of Fund Canadian neutral balanced fund





Portfolio Advisor Gryphon Investment Counsel Inc.

Toronto, Ontario



This Fund’s investment objective is to achieve superior long term returns through a combination ofcapital growth and income by investing primarily in large capitalization stocks of Canadian corporationsand Canadian government bonds. The weighting of the Fund’s portfolio will be allocated between assetclasses within specified ranges: 40%-80% equities; 20%-60% fixed income securities; 0%-30% short termmoney market securities and cash.



This Fund uses an investment strategy of allocating investments between short term money marketsecurities and cash, fixed income and equity securities. Reallocations between these asset classes tend to becarried out gradually and are fixed within specific ranges. The proportion of assets invested in differentclasses of securities will vary from time to time based on market conditions, economic outlook and level ofinterest rates and dividend yields.

The Fund may also invest up to 30% of its assets in foreign securities.

The Fund may use derivatives for hedging purposes and to provide more effective exposure whilereducing transaction costs.



Returns may vary with changes in interest rates and stock prices.


See ‘What are the risks of investing in a mutual fund? — General Investment Risk, Class Risk, InterestRate Risk, Credit Risk, Foreign Exchange Risk, Foreign Securities Risk, Securities Lending Risk, andRepurchase and Reverse Repurchase Transaction Risk’.



• you want both interest income and growth through strategic asset allocation among the threemajor asset classes



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Distribution Policy


Income Distributions Quarterly in the last calendar month of each quarterCapital Gains Distributions Annually in December of each year




Class A $4.72 $14.86 $26.05 $59.31

1 1 As Class F units have been offered for less than one year, expense information for the first full year isnot yet available.

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P I N N A C L E S T R AT E G I C B A L A N C E D F U N D

CANADIAN EQUITY FUNDS

Pinnacle Canadian Value Equity FundPinnacle Canadian Mid Cap Equity FundPinnacle Canadian Growth Equity FundPinnacle Canadian Small Cap Equity Fund

The Equity Funds offer the greatestpotential for long term growth. These Fundsalso have higher risk because the prices ofequity securities can change significantly in ashort period of time.

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Pinnacle Canadian Value Equity FundFund Details

Type of Fund Canadian focused equity fund





Portfolio Advisor Scheer, Rowlett & Associates

Investment Management Ltd.,

Toronto, Ontario



The Fund’s investment objective is to achieve superior long term returns through capital growth byinvesting primarily in securities of Canadian corporations.



The Fund uses a value-oriented investment style to achieve its investment objectives.


• up to 15% cash and cash equivalents

• up to 30% foreign securities.




Returns will vary with changes in stock prices.


See ‘What are the risks of investing in a mutual fund? — General Investment Risk, Class Risk, InterestRate Risk, Foreign Exchange Risk, Foreign Securities Risk, Securities Lending Risk and Repurchase andReverse Repurchase Transaction Risk’.



• you want a Canadian value holding in a diversified portfolio



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Distribution Policy






Class A $1.95 $6.14 $10.76 $24.50


25

P I N N A C L E C A N A D I A N VA L U E E Q U I T Y F U N D

Pinnacle Canadian Mid Cap Equity FundFund Details

Type of Fund Canadian focused small/mid cap equity fund





Portfolio Advisor Montrusco Bolton Investments Inc., Montreal,

Quebec



The Fund’s investment objective is to achieve superior long term returns through capital growth byinvesting primarily in stocks of small and medium capitalization Canadian corporations.

Any changes to the fundamental investment objectives of the Fund must be approved by a majority ofvotes cast at a meeting of unitholders called for that purpose.




• up to 30% foreign securities

• up to 15% cash and cash equivalents.






Stock prices of small and medium capitalization companies are typically more volatile due to size andshorter trading history.




• you want a Canadian medium capitalization value holding in a diversified portfolio


• you can accept moderate to high risk.

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Distribution Policy






Class A $4.20 $13.25 $23.22 $52.86


27

P I N N A C L E C A N A D I A N M I D C A P E Q U I T Y F U N D

Pinnacle Canadian Growth Equity FundFund Details

Type of Fund Canadian equity fund





Portfolio Advisor MFC Global Investment

Management

Toronto, Ontario



The Fund’s investment objective is to achieve superior long term returns through capital growth byinvesting primarily in stocks of large and medium capitalization Canadian corporations.



The Fund uses a growth-oriented investment style to achieve its investment objectives.













• you want a Canadian growth holding in a diversified portfolio



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Distribution Policy






Class A $1.74 $5.49 $9.63 $21.92


29

P I N N A C L E C A N A D I A N G R O W T H E Q U I T Y F U N D

Pinnacle Canadian Small Cap Equity FundFund Details

Type of Fund Canadian small/mid cap equity

fund






Portfolio Advisor Mawer Investment Management

Ltd., Calgary, Alberta



The Fund’s investment objective is to achieve superior long term returns through capital growth byinvesting primarily in stocks of small and medium capitalization Canadian corporations.



The Fund uses a growth-oriented investment style that is moderated by price sensitivity (growth at areasonable price) to achieve its investment objectives.










Stock prices of small capitalization companies are typically more volatile due to size and shortertrading history.


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• you want a Canadian small capitalization growth holding in a diversified portfolio



Distribution Policy






Class A $2.97 $9.37 $16.42 $37.39


31

P I N N A C L E C A N A D I A N S M A L L C A P E Q U I T Y F U N D

FOREIGN EQUITY FUNDS

Pinnacle American Value Equity FundPinnacle American Mid Cap Value Equity FundPinnacle American Large Cap Growth Equity FundPinnacle American Mid Cap Growth Equity FundPinnacle International Equity FundPinnacle International Small to Mid Cap Value Equity FundPinnacle Global Equity Fund

The Equity Funds offer the greatestpotential for long term growth. These Fundsalso have higher risk because the prices ofequity securities can change significantly in ashort period of time. Foreign Equity Fundsusually have more risk than Canadian EquityFunds because the investments may be incountries that have fewer regulations.

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Pinnacle American Value Equity FundFund Details

Type of Fund U.S. equity fund






Portfolio Advisor Metropolitan West Capital

Management, LLC

Newport Beach, California



The Fund’s investment objective is to achieve superior long term returns through capital growth byinvesting primarily in stocks of large capitalization U.S. corporations.






• some large capitalization non-U.S. securities.



The Fund may participate in securities lending, repurchase and reverse repurchase transactions toachieve its investment objectives and to enhance returns. You’ll find more information on securities lending,repurchase and reverse repurchase transactions and how the Fund limits the risks associated with themunder ‘What are the risks of investing in a mutual fund?’.




See ‘What are the Risks of Investing — General Investment Risk, Class Risk, Interest Rate Risk,Foreign Exchange Risk, Foreign Securities Risk, Securities Lending Risk, and Repurchase and ReverseRepurchase Transaction Risk’.

33



• you want long term growth of capital through well established, high quality U.S. companies

• you want a U.S. value holding in a diversified portfolio



Distribution Policy






Class A $3.90 $12.28 $21.52 $48.99


34

P I N N A C L E A M E R I C A N VA L U E E Q U I T Y F U N D

Pinnacle American Mid Cap Value Equity FundFund Details

Type of Fund U.S. small/mid cap equity fund






Portfolio Advisor Integrity Asset Management, LLC

Louisville, Kentucky



The Fund’s objective is to achieve superior long term returns through capital growth by investingprimarily in stocks of small and medium capitalization companies located in the U.S.

Any change to the fundamental investment objectives of the Fund must be approved by the majorityof votes cast at a meeting of unitholders called for that purpose.



The Fund’s investments may also include up to 15% cash and cash equivalents. The Fund may usederivatives for foreign currency hedging purposes only.






See ‘What are the risks of investing in a mutual fund? — General Investment Risk, Class Risk, InterestRate Risk, Foreign Exchange Risk, Foreign Securities Risk, Securities Lending Risk, and Repurchase andReverse Repurchase Transaction Risk’.



• you are seeking exposure to U.S. medium-sized companies with value characteristics

• you want a U.S. medium capitalization value holding in a diversified portfolio



35

Distribution Policy






Class A $5.64 $17.77 $31.15 $70.91


36

P I N N A C L E A M E R I C A N M I D C A P VA L U E E Q U I T Y F U N D

Pinnacle American Large Cap Growth Equity FundFund Details

Type of Fund U.S. equity fund





Portfolio Advisor American Century Investment

Management, Inc.

Kansas City, Missouri



The Fund’s investment objective is to achieve superior long term returns through capital growth byinvesting primarily in large capitalization stocks of U.S. corporations.



The Fund uses a growth-oriented investment style to achieve its investment objectives. The Fund’sinvestments may also include:


• up to 10% non-U.S. securities.








37



• you want the growth potential of investing in equity securities of U.S. companies

• you want a U.S. growth holding in a diversified portfolio



Distribution Policy






Class A $4.61 $14.54 $25.49 $58.02


38

P I N N A C L E A M E R I C A N L A R G E C A P G R O W T H E Q U I T Y F U N D

Pinnacle American Mid Cap Growth Equity FundFund Details

Type of Fund U.S. small/mid cap equity fund






Portfolio Advisor TCW Investment Management

Company

Los Angeles, California



The Fund’s investment objective is to achieve superior long term returns through capital growth byinvesting primarily in stocks of small and medium capitalization companies traded on U.S. stockexchanges.



The Fund uses a growth-oriented investment style to achieve its investment objectives.

The Fund’s investments may also include up to 15% cash and cash equivalents. The Fund may usederivatives for foreign currency hedging purposes only.







39



• you’re seeking exposure to U.S. medium-sized growth companies

• you want a U.S. medium capitalization growth holding in a diversified portfolio



Distribution Policy






Class A $5.64 $17.77 $31.15 $70.91


40

P I N N A C L E A M E R I C A N M I D C A P G R O W T H E Q U I T Y F U N D

Pinnacle International Equity FundFund Details

Type of Fund International equity fund






Portfolio Advisor Thornburg Investment

Management, Inc.

Santa Fe, New Mexico



The Fund’s investment objective is to achieve long term returns through capital growth by investingprimarily in large capitalization stocks of companies in Europe, Australia and the Far East.



The Fund varies its investment style as considered appropriate for each country or region in order toachieve its investment objectives, including amongst value oriented, growth-oriented investment styles andgrowth at a reasonable price.

The Fund may invest up to 15% of its assets in cash and cash equivalents and up to 10% of its assetsin securities of issuers in emerging markets.


The Fund may participate in securities lending, repurchase and reverse repurchase transactions toachieve its investment objectives and to enhance returns. You’ll find more information on securities lending,repurchase and reverse repurchase transactions and how the Fund limits the risks associated with themunder ‘What are the risks of investing in a mutual fund?’.





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• you want the growth potential of foreign equity securities while tracking the performance of majormarket indexes

• you already have sufficient Canadian and U.S. investments and are seeking geographic diversifica-tion outside of North America

• you want some currency diversification outside of North America



Distribution Policy






Class A $4.00 $12.60 $22.09 $50.28


42

P I N N A C L E I N T E R N AT I O N A L E Q U I T Y F U N D

Pinnacle International Small to Mid Cap Value Equity FundFund Details

Type of Fund International equity fund






Portfolio Advisor Munder Capital Management

Birmingham, Michigan



The Fund’s investment objective is to achieve superior long term returns through capital growth byinvesting primarily in stocks of small and medium capitalization corporations in Europe, Australia and theFar East.

Any changes to the fundamental investment objectives of the Fund must be approved by a majority ofvotes cast at a meeting of unitholders called for that purpose.



The Fund may invest up to 30% of its assets in securities of issuers in emerging markets and up to15% of its assets in cash and cash equivalents.

The Fund may use derivatives for foreign currency hedging purposes and to provide more effectiveexposure while reducing transaction costs.




Prices of equity securities tend to fluctuate more than those of fixed income securities resulting ingreater price fluctuations than would be expected of the money market or bond Funds.



43



• you’re seeking exposure to non-North American small to medium sized companies with valuecharacteristics

• you want some currency diversification outside of North America

• you want an international small to mid cap value holding in a diversified portfolio



Distribution Policy






Class A $5.54 $17.45 $30.58 $69.62


44

P I N N A C L E I N T E R N AT I O N A L S M A L L T O M I D C A P VA L U E E Q U I T Y F U N D

Pinnacle Global Equity FundFund Details

Type of Fund Global equity fund






Portfolio Advisor Harding Loevner LP

Somerville, New Jersey



The Fund’s investment objective is to achieve long term returns through capital growth by investingprimarily in stocks of large capitalization companies in North America, Europe, Australia and the Far East.



The Fund uses a fundamental growth-oriented investment style.

The Fund may invest up to 10% of its assets in securities of issuers in emerging markets and up to15% of its assets in cash and cash equivalents.


The Fund may participate in securities lending, repurchase and reverse repurchase transactions toachieve its investment objectives and to enhance returns. You’ll find more information about securitieslending, repurchase and reverse repurchase transactions and how the Fund limits the risks associated withthem under ‘What are the risks of investing in a mutual fund?,







• you’re seeking wide geographic diversification

• you want some currency diversification



45

Distribution Policy






Class A $3.90 $12.28 $21.52 $48.99


46

P I N N A C L E G L O B A L E Q U I T Y F U N D

What is a Mutual Fund andWhat are the Risks of Investingin a Mutual Fund?What is a mutual fund?

A mutual fund is a pool of money contributed by people with similar investment objectives. Aprofessional investment advisor — called a Portfolio Advisor — takes that large pool of cash and invests itfor the whole group. These investments could be shares, bonds, money market instruments or acombination of these. When you invest in a mutual fund, you receive units of the mutual fund.Unitholders share the mutual fund’s income, expenses, and any gains and losses from the mutual fund’sinvestments, generally in proportion to the units they own. The price of a unit, also described as the netasset value of the unit, changes every day, depending on how well the investments are performing.

Mutual funds may issue one or more classes of units which may be purchased by investors. The Fundsoffer Class A, Class F units and Class I units, where noted.

When the investments rise in value, the price of a unit goes up. When the investments drop in value,the price of a unit goes down. The value of an investment in a mutual fund is realized by redeeming theunits held. You make money on mutual funds if you buy your units at one price and sell them later at ahigher price. Of course, you lose money if you sell your units for less than you paid. You can also makemoney when the mutual fund pays you your share of the income and capital gains it has earned on itsinvestments. This is called a distribution.

Your investment in a mutual fund is not guaranteed. Unlike bank accounts or guaranteed investmentcertificates, units of a mutual fund are not covered by Canada Deposit Insurance Corporation (CDIC) orany other government deposit insurer is not guaranteed by The Bank of Nova Scotia (“Scotiabank”),Montreal Trust or National Trust Company.

What are the risks of investing in a mutual fund?

There are many factors that can affect the value of a mutual fund investment. The most commonones are:

General Investment Risk

Different kinds of securities held in a mutual fund carry varying amounts of risk. The value of thosesecurities may fluctuate from day to day in response to changes in interest rates, economic conditions andmarket and company news. This means that the units of a Fund held by an investor may be worth more orless than their original purchase price.

If the price of a mutual fund declines from the price at which units were purchased and units aresubsequently sold, the investor will lose money. History has shown that the longer a mutual fundinvestment is held, the greater the chance that the value of the investment will increase above the originalpurchase price.

Asset Backed and Mortgage Backed Securities Risk

Asset backed securities are debt obligations that are backed by pools of consumer or business loans.Mortgage backed securities are debt obligations backed by pools of mortgages on commercial or residentialreal estate. If there are changes in the market perception of the issuers of these types of securities, or in thecreditworthiness of the parties involved, the value of the securities may be affected. In the use of mortgagebacked securities, there is also a risk that there may be a drop in the interest rates charged on mortgages, amortgagor may default on its obligations under a mortgage or there may be a drop in the value of theproperty secured by the mortgage.

Class Risk

Some mutual funds offer two or more classes of units of the same fund. Although the value of eachclass is calculated separately, there’s a risk that the expenses or liabilities of one class of units may affect the

47

value of the other classes. If one class is unable to cover its liabilities, the other classes are legally responsiblefor covering the difference. We believe that this risk is very low.

Interest Rate Risk

To the extent that a mutual fund invests in money market or fixed income securities (such as bonds),its value is affected by changes in the general level of interest rates. When interest rates fall, bond pricesrise. That’s because existing bonds pay higher rates than newly issued ones, and are worth more. Conversely,when interest rates rise, bond prices fall, and so will the unit value of Funds that hold them.

The income earned by the mutual fund — and the income paid by the mutual fund to unitholders —is also affected by changes in interest rates.

Credit Risk

A fixed income security, such as a bond, is a promise to pay interest and repay the principal on thematurity date. There is always a risk that the issuer will fail to honour that promise. This is called creditrisk. Credit risk is lowest among issuers that have a high credit rating from a credit rating agency. It ishighest among issuers that have a low credit rating or no credit rating. Issuers with a low credit ratingusually offer higher interest rates to make up for the higher risk.

Foreign Exchange Risk

Investments in foreign securities carry the risk of fluctuations in the value of foreign currency inrelation to the Canadian dollar. If a foreign currency appreciates in relation to the Canadian dollar and themutual fund holds securities denominated in that currency, the market value of that portion of the mutualfund’s portfolio may tend to increase. The opposite is true if the foreign currency depreciates in valuerelative to the Canadian dollar.

A mutual fund may attempt to hedge the currency exposure of its foreign portfolio positions by usingderivatives.

Foreign Securities Risk

Mutual funds that hold foreign securities can offer benefits such as increased diversification andpotentially higher returns, but there are also additional risks. These are known as foreign securities risks.

Political, economic or social instability can also impact the value of foreign investments. Foreign stockexchanges may be smaller and less strictly regulated, resulting in decreased liquidity. Likewise, the rules foraccounting, financial reporting and securities may not be as strict as they are in Canada, and access toinformation may be less readily available.

Derivatives Risk

Some mutual funds may use derivatives, but only in ways allowed by Canadian securities regulators.While derivatives are useful investment tools, they also have the following risks:

• there is no guarantee that hedging will be effective

• some derivative instruments may lack liquidity and there is no guarantee a secondary market willexist

• investment exchange markets can impose trading limits that could prevent the carrying out of thederivative contract

• derivatives based on a stock market index could be adversely affected if trading is halted on anumber of stocks in the index

• the other party to a derivative contract may not be able to honour its obligations under thecontract

• money or other forms of collateral deposited with a derivatives dealer may be lost if the dealerexperiences financial difficulties or goes bankrupt

• increased risks are associated with foreign derivative instruments, including less liquidity andgreater credit risk.

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Securities Lending Risk

A mutual fund may lend securities held in its portfolio to qualified borrowers who provide adequatecollateral. In lending its securities, a mutual fund is exposed to the risk that the borrower may not be ableto satisfy its obligations under the securities lending agreement and the mutual fund would be forced totake possession of the collateral held. Losses could result if the collateral held by the mutual fund does nothave a value, at the time the remedy is exercised, which is sufficient to replace the securities borrowed.

Mutual funds must receive collateral worth no less than 102% of the value of the loaned securitiesand borrowers must adjust that collateral daily to ensure this level is maintained. Prior to entering into asecurities lending agreement, a mutual fund must ensure that the aggregate value of the securities loanedtogether with those that have been sold pursuant to repurchase transactions does not exceed 50% of itstotal asset value.

Repurchase and Reverse Repurchase Transaction Risk

When a mutual fund agrees to sell a security at one price and buy it back on a specified later datefrom the same party with the expectation of profit, it is entering into a repurchase agreement. When amutual fund agrees to buy a security at one price and sell it back on a specified later date to the same partywith the expectation of a profit, it is entering into a reverse repurchase agreement.

Mutual funds engaging in repurchase and reverse repurchase transactions are exposed to the risk thatthe other party to the transaction may become insolvent and unable to complete the transaction. In thosecircumstances, there is a risk that the value of the securities bought may drop or the value of the securitiessold may rise between the time the other party becomes insolvent and the time the Fund recovers itsinvestment. Mutual funds that engage in these transactions reduce this risk by holding as collateral enoughof the other party’s cash or securities to cover that party’s repurchase or reverse repurchase obligations.

To limit the risks associated with repurchase and reverse repurchase transactions, the collateral held inrespect of the repurchase or reverse repurchase obligations must be marked to market on each business dayand be fully collateralized at all times with acceptable collateral which has a value at least equal to 102% ofthe sold securities or cash paid for the securities by the mutual fund.

Prior to entering into a repurchase or reverse repurchase agreement, a mutual fund must ensure thatthe aggregate value of the securities of the mutual fund that have been sold pursuant to repurchasetransactions, together with securities loaned, does not exceed 50% of its total asset value at the time themutual fund enters into the transaction.

Real Estate Sector Risk

Some of the Funds concentrate their investments in the real estate sector of the marketplace. TheseFunds are better able to focus on the real estate sector’s potential, however these Funds are also riskier thanFunds with broader diversification. Sector specific Funds tend to experience greater fluctuations in pricebecause securities in the same industry tend to be affected by the same factors. These Funds must continueto follow their investment objectives by investing in their particular sector even during periods when thesector is performing poorly.

Investment Trust Risk

Some of the Funds invest in real estate, royalty, income and other investment trusts which areinvestment vehicles in the form of trusts rather than corporations. To the extent that claims, whether incontract, in tort or as a result of tax or statutory liability against a trust are not satisfied by the trust, thereis a remote risk that holders of units in the trusts, including the Fund, could be held liable for suchobligations. Investment trusts generally hold securities in or are entitled to receive payments from anunderlying active business or investment in property. To the extent that an underlying business orinvestment in property is susceptible to industry risks, stock market conditions, interest rate fluctuations,commodity prices and other economic factors, investment returns from an investment trust may besimilarly affected.

Although their returns are neither fixed nor guaranteed, investment trusts are structured in part toprovide a constant stream of income to investors. As a result, an investment in an investment trust may besubject to interest rate risk.

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Recent amendments to the Income Tax Act (Canada) (the “Tax Act”) significantly change the incometax treatment of most publicly traded trusts and partnerships (other than certain REITs). Generally the newrules include a tax on certain distributions or income allocations, as the case may be, from these entities totheir investors (the “SIFT Rules”). The SIFT Rules are effective for the 2007 taxation year for trusts andpartnerships that commenced public trading after October 31, 2006, but will be delayed until the 2011taxation year for trusts and partnerships that were publicly traded prior to November 1, 2006, providedthere is no “undue expansion” of the trust or partnership in the intervening period. Generally, the SIFTRules impose a tax on certain income earned by a publicly traded trust or partnership to which the SIFTRules apply that approximates the combined federal and provincial income tax rate applicable to acorporation and distributions or allocations, as the case may be, of such income to investors is taxed asdividends from taxable Canadian corporations. This dividend is deemed to be an eligible dividend forpurposes of the enhanced dividend tax credit if paid or allocated to a resident of Canada. As a result of theSIFT Rules, it is also expected that many publicly traded trusts and partnerships will convert to a corporatestructure in coming years. Such conversions could affect the return on investment in respect of such trustsand partnerships held through a Fund. In addition, the SIFT Rules have had, and may continue to have;an effect on the trading price of such trusts and partnerships, which may affect the net asset value of therelevant mutual fund.

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Organization and Management of the FundsThe following table outlines the various companies involved in operating the Funds:

Manager Scotia Asset Management L.P.Toronto, Ontario(effective November 2009, assuccessor to ScotiaMcLeod, adivision of Scotia Capital Inc.)

The Manager is responsible for providing theservices and facilities necessary for theoperation of the Funds, as well as all generalmanagement and administrative services. TheManager may engage third parties to performcertain services on its behalf.

Trustee Scotia Asset Management L.P.Toronto, Ontario(effective November 2009, assuccessor to ScotiaMcLeod, adivision of Scotia Capital Inc.)

The Trustee has full control and authorityover the assets, business and affairs of theFunds, on the terms outlined in the Funds’Declarations of Trust.

Principal Distributorof Class A andClass F units

Scotia Capital Inc.Toronto, Ontario

The Principal Distributor has the exclusiveright to distribute and arrange distribution ofClass A and Class F units of the Fundsanywhere in Canada where they are qualifiedfor sale.

Registrar International Financial DataServices (Canada)Limited Toronto, Ontario

The Registrar keeps track of the owners ofunits of each Fund, processes orders, andissues account statements and tax slips tounitholders.

Auditor PricewaterhouseCoopers LLPToronto, Ontario

The Auditor is an independent charteredaccounting firm. The Auditor performs anannual audit of each Fund and provides anopinion on the financial statements as to theirfair presentation, in accordance with GenerallyAccepted Accounting Principles (“GAAP”).

Portfolio Advisors Various Portfolio Advisors provide investment adviceand make investment decisions for the Funds.Each Fund has its own Portfolio Advisor. See‘Fund Details’ for more information.

Independent ReviewCommittee

In accordance with NationalInstrument 81-107, Independent ReviewCommittee for Investment Funds, we, asManager of the Funds, have established anIndependent Review Committee (“IRC”), witha mandate to review and provide input on ourpolicies and procedures dealing with conflictsof interest in respect of the Funds, and toreview conflict of interest matters that wepresent to the IRC. The IRC currently hasthree members, each of whom is independentof the Manager and any party related to theManager. The IRC will prepare, at leastannually, a report of its activities forunitholders. The current report is available atno charge on the internet atwww.scotiabank.com/pinnaclefunds.Additional information about the IRC,including the names of its members, isavailable in the Funds’ annual informationform.

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In certain circumstances, your approval may not be required under securities legislation to effect aFund merger or a change in the auditor of a Fund. In these circumstances, the IRC must approve theproposal and you will receive at least 60 days written notice before the change takes effect.

Metropolitan West Capital Management, LLC, American Century Investment Management, Inc.,TCW Investment Management Company, Thornburg Investment Management, Inc., Harding, LoevnerManagement, L.P. and Munder Capital Management are registered in the category of international advisorin Ontario or rely on the exemption for firms that are qualified to use the “exempt international advisor”category. The name and address of the agent for the service for each of these Portfolio Advisors are availablefrom the Ontario Securities Commission. Notwithstanding any registration in Ontario, these PortfolioAdvisors are not fully subject to the requirements of the Securities Act (Ontario). Currently, Scotia AssetManagement L.P assumes responsibility for the investment advice provided by Integrity Asset Management,LLC, Logan Circle Partners, L.P. and Forum Partners Europe (UK) LLP. All of the Portfolio Advisorsmentioned above are located outside of Canada and all or a substantial portion of their assets may besituated outside of Canada, which may make it difficult for investors to enforce their legal rights againstthese Portfolio Advisors.

The Custodian for the Funds is State Street Trust Company of Canada, Toronto, Ontario.

The Custodian is responsible for the safekeeping of the securities and cash in each Fund’s portfolio.

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Purchases, Switches and RedemptionsAbout the Classes of Units

The Funds are available in three classes of units: Class A units, Class F units and Class I units (wherenoted). The classes have different fees and are intended for different investors:

• Class A units are only available to investors who participate in the Pinnacle Program, throughScotiaMcLeod advisors or as otherwise permitted by the Manager. All of the Funds offer Class Aunits.

• Class F units are generally available to investors who have fee-based accounts with ScotiaMcLeod.We may make Class F units available to other investors from time to time. All of the Funds offerClass F units. If an investor is no longer eligible to hold Class F units, the Manager may reclassifythe Class F units as Class A units.

• Class I units are available to eligible institutional investors and other qualified investors. Class Iunits are offered by Pinnacle American Core-Plus Bond Fund, Pinnacle Canadian Small CapEquity Fund, Pinnacle American Value Equity Fund, Pinnacle American Mid Cap Growth EquityFund, Pinnacle American Mid Cap Value Equity Fund, Pinnacle International Equity Fund,Pinnacle International Small to Mid Cap Value Equity Fund, Pinnacle Global Equity Fund andPinnacle Global Real Estate Securities Fund. Class I units are currently only available throughScotia Asset Management L.P. If an investor is no longer eligible to hold Class I units, theManager may reclassify the Class I units as Class A units.

How to Buy the Funds

The minimum initial investment for Class A and Class F units is $1,000 and the minimumsubsequent investment is $500. For Class I units, the minimum initial investment is generally $1,000,000.At the discretion of the Manager these minimums may be reduced. When the initial investment is made,your dealer will send you a confirmation that summarizes the details of the purchase. The Funds do notissue unit certificates; the Manager arranges to keep records of unit ownership.

For Class A units, if the value of the investment(s) in your account falls below $100, we may sell yourunits and send you the proceeds. For Class F and Class I units, if the value of the investment(s) in youraccount falls below the minimum initial investment, we may sell your units and send you the proceeds.

We will give you 30 days written notice before selling your units.

Units are non-transferable except with the written consent of the Manager for the sole purpose ofgranting a security interest therein.

How We Calculate Net Asset Value Per Unit

Separate net asset values are calculated for each class of a Fund at the end of each day based on eachclass’ share of the Fund’s net asset value as determined in accordance with the Fund’s declaration of trust.The class net asset value per unit is calculated daily by dividing (1) the amount equal to the value of thatclass’ share of assets of a Fund, less that class’ share of the common expenses of the Fund and less thatclasses’ specific expenses by (2) the total number of units of that class outstanding at such time.

The net asset value per unit is determined daily, at the close of regular trading on the Toronto StockExchange, normally 4:00 p.m. Toronto time. In unusual circumstances, we may suspend the calculation ofthe net asset value per unit of each class, subject to obtaining any necessary regulatory approval. The unitprice of a class usually varies day to day in response to changes in the value of the Fund’s portfolio’ssecurities. However, as the income of Pinnacle Short Term Income Fund is credited daily to investors, theclass net asset value per unit of such Fund is expected to remain constant at $10.

Units are purchased, distributions reinvested and redemptions implemented for all Funds on the basisof the class net asset value per unit applicable to the transactions.

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How to Place Orders for the Funds

Your request to purchase units must be received before 3:00 p.m. Toronto time in order for thepurchase to be priced at the class net asset value per unit determined at 4:00 p.m. on such day. If the orderis received after 3:00 p.m., units will be issued at the class net asset value calculated at 4:00 p.m. on thenext business day. If the cash required to complete the transaction is not received within three trading days(one trading day in the case of the Pinnacle Short Term Income Fund) of receipt of the purchase order, thesame number of units purchased will be redeemed. If the Fund’s redemption price is less than the purchaseprice, your dealer will pay the difference to the Fund and collect that amount from you. If the redemptionprice is greater than the purchase price for the units, the Fund will keep the difference.

The Manager has the right to reject any order within one business day after it has been received. If anapplication is rejected, the purchase price paid by you will be refunded immediately. We may reject yourorder if you’ve made several purchases and sales of a Fund within a short period of time, usually 31 days.

If you purchase units of a Fund at a time when the Fund has a significant amount of undistributedincome and gains, the net asset value of the Fund and therefore the purchase price paid by you for theunits will reflect the amount of the undistributed income and gains. Upon the subsequent distribution bythe Fund of such income and gains, you may be subject to tax on your share of the distribution,notwithstanding that the distribution may reflect part of the purchase price paid by you for the units.

How to Switch the Funds

Switches are permitted from units of one Fund into units of another Fund, provided that theminimum investment requirements are met. The rules applicable to purchases and redemptions also applyto switches. If you switch units within 31 days of buying them, you may have to pay a short-term tradingfee. In a non-registered account, switching may result in a capital gain or loss for tax purposes. See ‘IncomeTax Considerations for Investors’.

How to Switch between Classes of a Fund

Reclassifications are permitted from one class of a Fund into another class of the same Fund if you areeligible for that class. The number of units you receive upon reclassification depends upon the relative netasset value per unit of the class of units being exchanged to the class of units being received. The rulesapplicable to purchases and redemption also apply to reclassifications. A reclassification from one class of aFund to another class of the same Fund is not considered a disposition for tax purposes.

How to Redeem Funds

All or some of the units held by you can be redeemed on any business day. Your request to redeemunits of the Funds must be received before 3:00 p.m. Toronto time in order for the redemption to bepriced at the net asset value per unit determined at 4:00 p.m. on such date. If the redemption request isreceived after 3:00 p.m., units will be redeemed at the net asset value per unit calculated at 4:00 p.m. onthe next business day. In the case of a redemption of the Pinnacle Short Term Income Fund, units will beredeemed at a price of $10 per unit plus the portion of that Fund’s net income and net capital gainsattributable to the redeemed units, if any, credited since the last reinvestment date.

If any documents which may be required by the Manager to complete the sale are not received withinten business days of the redemption request, the Manager will buy the same number of units sold. If thepurchase price is less than the sale price of the units, the Fund will keep the difference. If the purchaseprice is greater than the sale price for the units, your dealer is required to pay the Fund the difference. Thisamount will be collected from you.

Redemption proceeds will be paid within three business days after the documents required to completethe sale are received. Upon request, the Manager will mail you a cheque for the proceeds of the sale, orwill deposit the proceeds into an account designated by you, provided your cheque for the purchase of anyof the units being redeemed has cleared. If you sell units within 31 days of buying them, you may have topay a short-term trading fee. See ‘Fees and Expenses Payable by You — Short-Term Trading Fee’ for details.

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Under extraordinary circumstances, the rights of investors to redeem units may be suspended by aFund. A Fund may suspend the right to sell units if normal trading is suspended in any market wheremore than fifty percent of that Fund’s assets are traded.

Optional ServicesTax-Deferred Plans

Each of the Funds is an eligible investment for all registered accounts.

This means you can hold units of the Funds in the following registered accounts (collectively referredto as “tax deferred plans”):

• registered retirement savings plans (“RRSPs”), including group RRSPs

• locked-in RRSPs and locked-in retirement accounts (“LIRAs”)

• registered retirement income funds (“RRIFs”)

• life income funds (“LIFs”) and life registered income funds (“LRIFs”)

• deferred profit sharing plans (“DPSPs”)

• registered pension plans (“RPPs”), including defined contribution pension plans (“DCPPs”)

• registered education savings plans (“RESPs”)

• registered disability savings plans (“RDSPs”)

• tax-free savings accounts (“TFSAs”).

Optimized Portfolios (Class A Units)

You have the option of choosing from several optimized portfolios, professionally designed with theassistance of NTGA. Each of the optimized portfolios consists of various Funds as well as cash and cashequivalent securities. You can choose an optimized portfolio with the help of your ScotiaMcLeod advisor.You can also set the target weighting for each Fund within your portfolio if you wish to use the automaticrebalancing as described below. If NTGA recommends a change in weighting in a particular optimizedportfolio or a change in Funds comprising the particular optimized portfolio, such change in weighting orchange in the Funds comprising the particular optimized portfolio will not be made unless you agree withyour ScotiaMcLeod advisor to make the change.

Custom Portfolios (Class A Units)

You also have the option of designing a custom portfolio with the help of your ScotiaMcLeod advisor.You can generally choose as many or as few Funds as you wish to include in the custom portfolio. You canalso set the target weighting for each Fund within your portfolio if you wish to use the automaticrebalancing as described below.

Automatic Rebalancing (Class A Units)

At your request, your optimized or custom portfolio can be automatically rebalanced to the set Fundtarget weightings in each portfolio. The rebalancing will take place on or about the 15th day of the monthfollowing the end of each calendar quarter. The short-term trading fee doesn’t apply to rebalancing that isoffered in connection with an optimized or custom portfolio.

If you hold your Funds in a non-registered account, you may realize a capital gain or loss when youraccount is rebalanced. Capital gains are taxable.

Pre-Authorized Chequing Plan

Regular investing is an effective way to build wealth. In order to facilitate regular investing, theManager has established a Pre-Authorized Chequing Plan. Once the minimum initial investment in a Fundhas been made, you can authorize regular deductions from your bank account to buy units. The minimumamount per authorized deduction is $500. You can suspend this authorization at any time.

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If you make a purchase under a Pre-Authorized Chequing Plan, you will receive a renewal simplifiedprospectus for the Funds only if you request it. If you would like to receive a copy of a renewal prospectusalong with any amendment, please contact us at 1-800-268-9269 (416-750-3863 in Toronto) or contactyour dealer. The current prospectus and any amendments may be found at www.sedar.com or atwww.scotiabank.com/pinnaclefunds. Although you do not have a statutory right to withdraw from apurchase of units made under a Pre-Authorized Chequing Plan, you will continue to have a right of actionfor damages or rescission in the event a renewal prospectus contains a misrepresentation, whether or notyou request a renewal prospectus.

Automatic Withdrawal Plan

If you have a minimum of $50,000 in your Funds account, you may establish an automaticwithdrawal account to provide predetermined cash payments through automatic redemption of units. Youmay suspend this authorization at any time. The Manager reserves the right to terminate this arrangementfor accounts that fall below a market value of $25,000.

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Fees and ExpensesThis table lists the fees and expenses that you may have to pay if you invest in the Funds. You may

have to pay some of these fees and expenses directly, or the Fund may have to pay some of these fees andexpenses, which will therefore reduce the value of your investment in the Fund.

Fees and Expenses Payable by the Funds

Management Fees These fees are calculated and accrued daily and paid monthly. Thetable below shows the annual rate of the management fees for theClass F units payable by each Fund to the Manager. Each Fund isrequired to pay applicable goods and services tax on the managementfees paid to us.

Class F MaximumManagement FeesAnnual Rate (%)

Pinnacle Short Term Income Fund 0.50%Pinnacle Income Fund 0.70%Pinnacle High Yield Income Fund 0.75%Pinnacle American Core-Plus Bond Fund 0.75%Pinnacle Global Real Estate Securities Fund 1.00%Pinnacle Strategic Balanced Fund 1.00%Pinnacle Canadian Value Equity Fund 1.00%Pinnacle Canadian Mid Cap Equity Fund 1.00%Pinnacle Canadian Growth Equity Fund 1.00%Pinnacle Canadian Small Cap Equity Fund 1.00%Pinnacle American Value Equity Fund 1.00%Pinnacle American Mid Cap Value Equity Fund 1.00%Pinnacle American Large Cap Growth Equity Fund 1.00%Pinnacle American Mid Cap Growth Equity Fund 1.00%Pinnacle International Equity Fund 1.00%Pinnacle International Small to Mid Cap ValueEquity Fund 1.00%Pinnacle Global Equity Fund 1.00%

Class A

No management fees are charged by the Manager in respect of theClass A units of the individual Funds. If you have a Pinnacle ProgramAgreement with ScotiaMcLeod, you will agree to pay an asset basedfee for the services offered under that Agreement. You will pay the feeson a quarterly basis and the payment can only be made through theredemption of Class A units held in the Funds, unless otherwisepermitted by ScotiaMcLeod. The maximum annual fee charged is1.25% on Money Market and Bond Funds and 2.5% on all otherFunds, plus any applicable goods and services tax. ScotiaMcLeod willpay the Manager up to the rate of fees it receives in respect of Class Ffor any Fund. ScotiaMcLeod also reimburses the Manager for thatportion of the fees of the portfolio advisors and NGTA attributable tothe Class A units and may reimburse the Manager for certain otherexpenses.

Any fee for purchases of Class A units outside the Pinnacle Programare negotiated separately with your dealer and the Manager.

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Class I

Fees for services of the Manager payable by Class I investors arenegotiable by the investor and are payable directly to the Manager.The maximum amount will not exceed the Class A annual rate plusany applicable goods and services tax.

Operating Expenses Class A: The Class A units of Funds bear their proportionate share ofthe common expenses relating to the operation of the Funds and thecarrying on of their business, including legal and audit fees, taxes,interest, administrative costs relating to the issue and redemption ofunits, brokerage commissions, as well as the cost of financial and otherreports and complying with all applicable laws, regulations andpolicies. These expenses also include the annual fee paid to each IRCmember, fees for each meeting he or she attends, and the reasonableexpenses associated with the performance of his or her duties as anIRC member. Currently, each member of the IRC is entitled to anannual retainer of $10,000 ($15,000 for the Chair), and a per meetingfee of $1,000 for attending each IRC meeting and $800 for attendingeach meeting held for information or education purposes. The amountof expenses may vary from one Fund to another but will not exceed0.50% of the Class A net assets of each Fund. Class specific expensessuch as the costs of holding a unitholder meeting specific to membersof the class are not included in the 0.50% cap on expenses.ScotiaMcLeod is responsible for reimbursing the Manager for expensesin excess of 0.50%.

Class F: The Class F units of Funds bear their proportionate share ofthe common expenses relating to the operation of the Funds and thecarrying on of their business, including legal and audit fees, taxes,interest, administrative costs relating to the issue and redemption ofunits, brokerage commissions, as well as the cost of financial and otherreports and complying with all applicable laws, regulations andpolicies. These expenses also include the annual fee paid to each IRCmember, fees for each meeting he or she attends, and the reasonableexpenses associated with the performance of his or her duties as anIRC member. Currently, each member of the IRC is entitled to anannual retainer of $10,000 ($15,000 for the Chair), and a per meetingfee of $1,000 for attending each IRC meeting and $800 for attendingeach meeting held for information or education purposes. In addition,there are class specific expenses such as the costs of holding aunitholder meeting specific to members of the class.

Class I: The Class I units of Funds bear their proportionate share ofthe common expenses relating to the operation of the Funds and thecarrying on of their business, including legal and audit fees, taxes,interest, administrative costs relating to the issue and redemption ofunits, brokerage commissions, as well as the cost of financial and otherreports and complying with all applicable laws, regulations andpolicies. These expenses also include the annual fee paid to each IRCmember, fees for each meeting he or she attends, and the reasonableexpenses associated with the performance of his or her duties as anIRC member. Currently, each member of the IRC is entitled to anannual retainer of $10,000 ($15,000 for the Chair), and a per meetingfee of $1,000 for attending each IRC meeting and $800 for attendingeach meeting held for information or education purposes. In addition,there are class specific expenses such as the costs of holding aunitholder meeting specific to members of the class.

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Fees and Expenses Payable by You

Sales Charges No sales commission or other sales charge is payable for anypurchase, switch or redemption of the Funds.

Short-Term Trading Fee Short-term trading by investors can increase a Fund’s expenses, whichimpacts all investors in the Fund, and can affect the economic interestof long-term investors. Short-term trading can affect a Fund’sperformance by forcing the portfolio advisor to keep more cash in theFund than would otherwise be required. To discourage short-termtrading, a Fund may charge a fee of 2% of the amount you sell orswitch, if you sell or switch your units within 31 days of buying them.The fee does not apply to Class I units and may not apply to:

• Pinnacle Short Term Income Fund;

• redemptions that are carried out to accommodate payment ofSummit Program fees or Pinnacle Program fees;

• automatic rebalancing that is part of the service offered by theManager;

• transactions not exceeding a certain minimum dollar amount, asdetermined by the Manager from time to time;

• trade corrections or any other action initiated by the Manager orthe applicable portfolio advisor;

• transfers of units of one Fund between two accounts belonging tothe same unitholder;

• regularly scheduled RIF or LIF payments; and

• regularly scheduled Automatic Withdrawal Plan payments.

Any formal or informal arrangements to permit short-term trading aredescribed in the Funds’ annual information form. If securitiesregulations mandate the adoption of specified policies relating toshort-term trading, the Funds will adopt such policies if and whenimplemented by the securities regulators. If required, these policieswill be adopted without amendment to this simplified prospectus orthe Funds’ annual information form and without notice to you, unlessotherwise required by such regulations.

1 The 0.50% cap excludes class specific expenses, brokerage commissions, interest charges and taxes of alltypes, including sales tax and GST.

Dealer CompensationAlthough ScotiaMcLeod advisors receive no up-front sales commissions in connection with the sale of

Class A units of the Funds, they are compensated in connection with certain ongoing services they provideto investors in the Pinnacle Program. Currently, ScotiaMcLeod pays no more frequently than monthly, aservice fee to ScotiaMcLeod advisors in an amount up to 72% of the fee paid by each Class A investor toScotiaMcLeod.

For the sale of units of the Funds to investors outside of the Pinnacle Program, ScotiaMcLeod alsopays, no more frequently than monthly, a service fee to ScotiaMcLeod advisors in an amount up to 72% ofthe fee paid by each Class A investor to ScotiaMcLeod.

For the purchase of Class F units, the Manager does not pay any trailing commission to a dealer,including ScotiaMcLeod. The dealer and the investor negotiate a service fee in respect of the Class F unitswhich is in an amount up to 1.5% of the value of the Class F units, payable by the investor no morefrequently than monthly.

No service fee is payable in respect of Class I units.

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A ScotiaMcLeod advisor may also receive sales incentives based on his or her overall performance.

The Manager may participate in co-operative marketing programs with dealers to help them marketthe Funds. We may pay up to 50% of the cost of these co-operative marketing programs in accordancewith the rules set out in National Instrument 81-105 Mutual Fund Sales Practices.

The Bank of Nova Scotia owns, directly or indirectly, 100% of Scotia Asset Management L.P. andScotiaMcLeod , a division of Scotia Capital Inc.

Dealer Compensation from Management FeesPrior to the date of this simplified prospectus, no management fees have been payable by a Fund.

Income Tax Considerations for InvestorsThis section is a summary of how investing in the Funds can affect your taxes. It assumes that you’re

an individual other than a trust, a Canadian resident and deal at arm’s length with the Funds and you holdyour units as capital property.

More detailed information is provided in the Funds’ annual information form. Because tax laws varyby province and every investor’s situation is different, we recommend you get advice from a tax expert.

How your Investment Can Earn Money

Funds earn money in the form of income and capital gains. Income includes the interest anddividends a Fund earns on its investments and gains on certain derivatives. Capital gains are earned when aFund sells investments for a profit.

You earn money in the form of distributions when the Fund pays you your share of the income andcapital gains it has earned. In general, each Fund will distribute enough of its net income and net realizedcapital gains each year to unitholders so it won’t have to pay income tax.

You can also earn money in the form of a capital gain when you sell or switch your units for a profit.You can realize a capital loss if you sell or switch your units at a loss.

How Earnings are Taxed

The tax you pay depends on whether you hold your units in a tax-deferred plan or in a non-registeredaccount.

Units Held Outside a Tax-Deferred Plan

For units of a Fund which are held outside a tax-deferred plan, you must include in your income eachyear the amount of distributions of income and taxable capital gains paid or payable to you in the year bya Fund, whether you receive these amounts in cash or in additional units. The higher a Fund’s portfolioturnover rate, the greater the chance the Fund will make taxable distributions.

The price of a unit of a Fund may include income and/or capital gains that the Fund has earned, butnot yet realized and/or distributed. If you buy units of a Fund before it makes a distribution, you will betaxed on that distribution, even though the Fund earned the amount before you owned it. For example,many Funds make their only, or most significant, distribution of capital gains in December. If you buyunits late in the year, you may have to pay tax on the income and capital gains the Fund earned for thewhole year. That will mean that you will pay tax on Fund earnings that you had no benefit from.Distributions by a Fund that are a return of capital are not taxable but will generally reduce the adjustedcost base of your units of that Fund.

When you redeem or switch your units of a Fund to units of another Fund, you may realize a capitalgain or loss. Your capital gain (or loss) will be equal to the difference between the amount you receive onthe redemption or switch (net of any reasonable disposition costs such as deferred sales charges) and youradjusted cost base of the units redeemed or switched. You must calculate your adjusted cost base separately

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for each class of units of each Fund that you own. In general, the aggregate adjusted cost base of your unitsequals:

• your initial investment, plus

• additional investments, plus

• reinvested distributions, minus

• any return of capital distributions, minus

• the adjusted cost base of any previous redemptions.

Individuals, including certain trusts and estates, are subject to an alternative minimum tax. If you arean individual, you may be liable for this alternative minimum tax in respect of realized capital gains and/ordividends in respect of your units of a Fund.

You should keep detailed records of the purchase cost of your investments and distributions youreceive on those units so you can calculate their adjusted cost base. You may want to get advice from a taxexpert.

The fees paid by unitholders to ScotiaMcLeod in respect of Class A units may not be deductible byunitholders. Unitholders should consult their own tax advisors.

Units Held in a Tax-Deferred Plan

Where you hold your units in a tax-deferred plan, you do not pay any tax on distributions from theFund or any capital gains realized from redeeming or switching units inside the plan. See ‘OptionalServices — Tax Deferred Plans’. Withdrawals from a tax-deferred plan are generally taxable. However,withdrawals from TFSAs are not subject to tax, and RESPs and RDSPs are subject to special rules.

So long as each of the Funds is a mutual fund trust or registered investment for tax purposes, units ofthe Funds are “qualified investments” for RRSPs, RRIFs, RESPs, DPSPs, RDSPs and TFSAs.

What Are Your Legal Rights?Securities legislation in certain provinces gives you the right to withdraw from an agreement to

purchase mutual fund securities within two business days of receiving a simplified prospectus, or withinforty-eight hours after receiving confirmation of your purchase. If the agreement is to purchase suchsecurities under a contractual plan, the time period during which withdrawal may be made may be longer.

In several of the provinces and territories, securities legislation also allows you to cancel an agreementto buy units and get your money back, or in some cases to make a claim for damages if the simplifiedprospectus, annual information form or financial statements (including any amendments) contain amisrepresentation. These rights must usually be exercised within certain time limits. You should refer toany applicable provisions of the securities legislation of your province or territory for the particulars of theserights or consult with a legal advisor.

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The Pinnacle Funds

Class A and Class F units and Class I unitswhere noted

Money Market Fund


Bond Funds

Pinnacle Income FundPinnacle High Yield Income FundPinnacle American Core-Plus Bond Fund (Class I units available)

Real Estate Fund

Pinnacle Global Real Estate Securities Fund (Class I units available)

Balanced Fund


Canadian Equity Funds

Pinnacle Canadian Value Equity FundPinnacle Canadian Mid Cap Equity FundPinnacle Canadian Growth Equity FundPinnacle Canadian Small Cap Equity Fund (Class I units available)

Foreign Equity Funds

Pinnacle American Value Equity Fund (Class I units available)Pinnacle American Mid Cap Value Equity Fund (Class I units available)Pinnacle American Large Cap Growth Equity FundPinnacle American Mid Cap Growth Equity Fund (Class I unitsavailable)Pinnacle International Equity Fund (Class I units available)Pinnacle International Small to Mid Cap Value Equity Fund (Class Iunits available)Pinnacle Global Equity Fund (Class I units available)

54D 10843 12/09

Managed by:

Scotia Asset Management L.P.

Scotia Plaza

40 King Street West

Toronto, Ontario

M5H 1H1

Toll Free: 1-800-268-9269

(416-750-3863 in Toronto)

Additional information about the Funds is available in the Funds’ annualinformation form, their most recently filed annual and interimmanagement reports of fund performance and their most recently filedannual and interim financial statements. These documents areincorporated by reference into this simplified prospectus which meansthey legally form part of this document just as if they were printed in it.

You can get a copy of the Funds’ annual information form, managementreports of fund performance, and financial statements at your request,and at no cost, by calling toll free 1-800-268-9269 (416-750-3863 inToronto), or by email or through the Pinnacle website atwww.scotiabank.com/pinnaclefunds.

These documents and other information about the Funds such asinformation circulars and material contracts, are also available on theSEDAR website at www.sedar.com, or on the Pinnacle website atwww.scotiabank.com/pinnaclefunds.

EACH OF SCOTIA ASSET MANAGEMENT L.P. AND SCOTIACAPITAL INC. IS A CORPORATE ENTITY SEPARATE FROM,ALTHOUGH WHOLLY-OWNED BY, THE BANK OFNOVA SCOTIA

The Pinnacle Funds - scotiabank.com · The Pinnacle Funds Simplified Prospectus December 11, 2009...

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